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Wednesday, January 03, 2007

Great Danes?

Ho hum. Yet another article telling us all why Denmark is so fabulous - this time in The New Republic. Jonathan Cohn's piece, Neoliberal utopia awaits: Great Danes, is subscribers only. But fortunately Daniel Von Trier has posted it on his weblog. Here's an excerpt:

...nobody is suggesting that other countries could--or even should--import the Danish model whole. (Among other things, the strong sense of common purpose has an uglier side: relatively harsh treatment of foreigners and immigrants.) The idea, rather, is to take broad lessons from Denmark's experience. And the broadest lesson would seem to be the most obvious one: that it is entirely possible to have a large welfare state, with generous benefits, without choking the economy. Data from the rest of Scandinavia, which all use variants of the same economic model, support this argument.

In a recent Scientific American column focusing on the performance of these Nordic countries, Columbia University economist and best-selling author Jeffrey Sachs blasted the right's anti-tax, antigovernment conventional wisdom, concluding that "a generous social-welfare state is not a road to serfdom but rather to high levels of satisfaction, fairness, economic equality and international competitiveness."

Nor is Sachs the only prominent economist who has taken notice of Scandinavia's success. So have Harvard's Richard Freeman and Nobel Prize-winner Joseph Stiglitz, the former chief economist for the World Bank. Even some relatively conservative economists--like the American Enterprise Institute's Kevin Hassett, who has been an adviser to John McCain--will concede that the Nordic model works, although they are dubious that the United States could copy it: "The Scandinavians," Hassett says, "show that you don't have to have a terrible economy if you have a big welfare state and high taxes."

Even the more conservative of Clinton's economic adviser are interested:

For most of the 1990s, the Clinton administration pursued a relatively conservative set of economic policies that focused on efforts to improve overall growth, such as free trade and balanced budgets. Most economists believe Clinton's economic policies did, in fact, strengthen the economy as a whole. But it's also becoming apparent that the poor and middle class didn't benefit from the subsequent period of growth as much as the administration had hoped--and that both groups remain surprisingly vulnerable to economic dislocation today.

Of course, even back in the early '90s, not every member of the Clinton administration was so sanguine about the policies it was pursuing at the time. Among those dissenting was then-Secretary of Labor Robert Reich, who proposed that "if we blended our flexible labor markets with [Europe's] investments in human capital and put the safety net somewhere in between ours and theirs, you would have the best system in the world." Reich's argument famously lost out to those of Clinton's more conservative advisers--among them former National Economic Council Chairman Laura Tyson and former Treasury Secretary Robert Rubin.

And so it was a little ironic that, a few weeks ago, it was Tyson and Rubin, along with some other former Clinton advisers, who found themselves discussing Denmark at a panel on economic policy co-sponsored by The New Republic and the Brookings Institution. Tyson, who just completed five years as dean of the London Business School, first raised the possibility that Denmark might be a model for the United States, noting that "there is nothing in the growth rates to suggest that Denmark is paying a penalty for having a high level [of taxes and government spending]. ... This is not to mention in addition the fact that health care coverage in Denmark is universal, and it is not to mention the fact that, actually, Denmark has one of the lowest poverty rates in Europe and has the lowest poverty rates for children in all of the oecd countries."

Upon hearing that description, Rubin quipped, "I think I would like to move to Denmark." That, surely, isn't necessary. But a fact-finding visit might be worthwhile.

Forgive my scepticism, but if even a British Labour government balks at the idea of introducing the Danish 'flexicurity' model, then there is no hope of a US administration taking it up. It's not that the Danish aka Nordic aka Scandinavian model dosen't work - it does. But it is damn expensive. I doubt that taxpayers in Anglo-saxon countries are prepared to foot the bill.

Comments

The WHO report did split the findings, so if you are just concerned with non-relative measures such as Health and Wellbeing, then you still have to face the fact that the US scores below the other developed nations. There was no equality taken into account here - Americans just live shorter lives, high infant mortality, fewer practitioners, etc. AE, your argument seems to suggest that European systems create a lower "average" when in fact the statistics show it is the US who settles with a lower average.

Americans are clearly not happy with the "volunteer" program, as the US again ranked near the bottom in user satisfaction.

Once again, the administrative and paperwork expenses are much higher in the US private system. Without the scale or standardization efficiencies, the private system has a lot of overhead waste. No other spending component comes close to explaining the difference.

I'm also a bit skeptical about claims that the governments are standing in the way. Who has the best "average" health? These socialist Nordic states. Who creates the most patents, scientific publications, and discoveries (per capita)? Again, it's the Nordics. For a society that promotes "average", they sure seem to be the best a lot.

I'm not sure why Monopoly power shows a more desirable economy, but most of the largest 100 companies (by revenues) are European - only 1/3 are US. Capital markets are international these days. Companies don't join the NYSE because they are rushing for the American healthcare system.

CBO, OTA, and GAO have each published reports that said we could cover the entire population with no additional spending if we could only reduce the private system administrative costs to levels as low as Medicare. It's the inefficient administration that makes private care so expensive.

Nietz, I've cited statistics above that support my statements and if you look at basic economic models, they also support my statements. I've stated above "the Danes (or Nordic model) are more willing to fight foreigners for their social programs, which are reflected in their closed economic and immigration policies. However, is that something to really be proud about?" Monopoly power often reflects new products that will improve living standards. 40 of the 100 largest global firms are American, including 20 of the top 40. All of Europe also has 40 in the top 100. The E.U. has 170 million people more than the U.S. and all of Europe has even more (see link below). Also, roughly 50% of the top 200 Information-Age firms are American and seven of the top 10 Biotech firms are American. Only one European firm, a Swiss firm, is in the top 10. Government health care has some benefits, e.g. economies of scale. However, waste, fraud, and abuse should be included, along with shifting paperwork from government to physicians. 60% of the WHO criteria is equality. Many statistics show the U.S. has a flatter and higher average bell curve, e.g. income, education, health, etc.

I've not seen a single respected reference that stated the private system was more efficient in the US than a public system. Everyone from the OECD, GAO, OTA, WHO, have stated the US system is less efficient, with the highest administrative costs of all. I've seen you claim that authorities like the WHO or UN are biased, but when I looked at the statistics, I found American health was on average, objectively lower, excluding any scores that include "equality".

If government programs really did create waste and fraud that eliminated the advantage of scale, then we would then expect the US to have a cheaper healthcare system or better average health statistics than the rest of the developed world. We do not.

The fact that immigration is lower in the Nordics just further reinforces the point that their system does not promote mediocrity. Their population has most likely been educated and raised in that socialist system, and it did not prevent them from doing so well. Immigration in nations like the US typically pull up our average anyway, with their higher education levels.

Nietz, you stated "Americans are clearly not happy with the "volunteer" program, as the US again ranked near the bottom in user satisfaction." However, the WHO stated the following: The WHO gives the United States high marks for its world-class doctor training and advanced medical technology. And the United States tops the list in "responsiveness" for virtues like confidentiality, brief waiting periods, and patient decision-making autonomy." If a survey was done between private health insurance and public health insurance, I think you'd find almost all Americans will choose private health insurance. Most immigrants to the U.S. are below average in health, education, and income. A flatter bell curve reflects there's a larger number of Americans at the lower tail. However, that doesn't necessarily imply the average American is less healthy. I suspect, the lower tail are mostly Americans who have government health insurance.

The US scores well on high quality education, right below France, Germany, Japan, and the Nordics. When 1/5th of the population doesn't have healthcare, I'm not surprised the US has waiting times only slightly worse than Germany. A private system is also more confidential - as part of the efficiencies, health records are typically shared in a state program.

It's a bit interesting to note the socialist welfare states do the best - better than the more conservative Canada, Australia, UK, as well.

Most immigrants are actually better educated and healthier than the US average.

The bell curve may be flatter, but it is not higher for America. As has been pointed out many times, the average health statistics are worse in America than the rest of the developed world.

AE: "I suspect, the lower tail are mostly Americans who have government health insurance."

You would be wrong. The lower tail are those without healthcare at all. As the Joint US/Canadian government study found (remember, Canada is below-average), there was no difference in care provided between Americans with coverage and anyone in Canada. The only difference came when evaluating those who had no care at all.

AE: "the Danes (or Nordic model) are more willing to fight foreigners for their social programs, which are reflected in their closed economic and immigration policies."

If this is the basis for your argumentation, AE, then it is false. The Nordics have established large non-European foreign populations and assimilated them fairly easily.

Admittedly, they are not as large as the population that ex-colonial powers have had to assimilate. But, that is what must be paid to an ex-coloniser. Viz., the Puerto Rican and Philippine populations in the US.

And, by NO MEANS is this population a drag on Nordic health care systems.

AE: "The WHO gives the United States high marks for its world-class doctor training and advanced medical technology."

You're rabbiting, AE.

So what? Good training, bad performance.

The purpose of a health care system is ... to provide health care to the largest population possible, not enrich doctors (and lawyers).

This was THE major criteria of assessment for the WHO study, and why the US comes out, in the listing, just ahead of Cuba.

Your attitude is entirely academic, as if good professors automatically translate into good students, good graduates, and good professionals. Which, btw, is another fallacy widely held in the US and which the statistics (PISA) prove wrong.

It is incredible the way you have wrapped yourself in a protective shield of hubris and denial as regards social services in the US. Do you work in the White House? ; ^ ) Badly flawed, that place, truly badly flawed.

Like science, medical training is very high quality in the US. However, we don't graduate as many doctors or scientists as the other states which also have high quality education. We used to make up most of this gap through immigration, but no longer. In healthcare, this shortage of workers helps increase wages and costs but there is no real benefit to the population.

N1950: "In healthcare, this shortage of workers helps increase wages and costs but there is no real benefit to the population."

Understandable. America is a country where a sentient "market system" supposedly knows how to match supply and demand. Your post indicates that this is lamentably not the case in terms of health care.

And, I can agree. Health care is a "special case" as are most services of a generalized public utility.

In France, after internship, doctors must spend two years at a post (usually rural) that they would not have otherwise chosen. The priority of the community prevails over that of the individual, as it should in public services.

Of course, in France, all further education is also paid by the state, so the state can exact this sort of public service where necessary. Frankly, a university education should also be free, gratis and for nothing for those who chose to obtain one. State universities can be subsidized federally to provide an education to one and all. (And, for certain skills, such as medical, why not offer students a stipend to pursue their studies?)

(At least they wouldn't be joining the Army as cannon fodder with the hope of getting a "free education". What a perilous rip-off that has become.)

My original statement was "Equality tends to cause disincentives, which result in a lower average. For example, if enough people are receiving free benefits to make them about average, there may be no incentive for them to work. Also, many may quit work for free benefits, because work becomes more expensive and leisure becomes less expensive. So, free benefits can create a lower and larger average." The U.S. Immigration Act of 1965 increased the quotas of high skilled and low skilled workers at the expense of average skilled workers. Also, more non-Europeans were allowed to immigrate to the U.S. at the expense of fewer Europeans. Unlike the Nordic model, the U.S. has an open immigration policy for poor immigrants. Of course, a large proportion of poor immigrants will lower the average.

Also, I may add, the WHO states the U.S. tops the list in brief waiting periods, which doesn't imply a shortage of U.S. physicians. If Americans are so uneducated compared to Europeans, why does the U.S. win more Nobel Prizes than the rest of the world combined? Almost all Americans know (with the exception of Nietz) their private health insurance is better than public health insurance and Americans can choose whether they want insurance or not (and if they can't afford it, they qualify for free public insurance).

AE:"Equality tends to cause disincentives, which result in a lower average."

Which is clearly not the case with the Nordic implementation, as they are exceptional in nearly every measure. Nor does it seem to be the case with health-care, as those incentives do not seem to be making Americans healthier than the rest of the OECD.

The average immigrant in America is not less educated than the general population - They are not bringing down the average education level. The immigration level in Nordic states is actually relatively high and considering the foreign-born only account for 10% of the US population, this looks more like grasping at straws to find an excuse. To really drag down the US numbers, this 10% would have to be highly uneducated.

I do a lot of statistic-citing, and I see vague responses that cannot be proved - like the UN is biased, or Nordic immigrants are just better than American, or the private system provides intangible benefits, or government care creates waste that doesn't show up in the data, or general knowledge maintains that private care is better.

There is no need to guess about fewer physicians. The statistics show we have fewer physicians, per capita. http://www.oecd.org/dataoecd/15/23/34970246.pdf We have short waiting periods because we have the highest proportion of people who admit they actually go without needed care.

The US wins most nobel prizes because Nobel prizes are typically awarded for discoveries made decades ago and very few have been granted for discoveries made since the late 70s so far. There is no question the US dominated science in this era - Europe didn't overtake the US until the mid 90s. We didn't fall behind in per capita levels until the late 90s. Of course, it wasn't the private sector that dominated R&D prior to the 80s - this was mostly government research. If government R&D was really so poor, why does US actually win so many Nobel Prizes? If American R&D is superior now, why don't Americans publish in journals, graduate researchers, or receive as many patents as the rest of the OECD?

I have little doubt most Americans would actually choose a public healthcare system over the private, if they had to directly pay the costs associated with it. I've seen no statistics that indicate the quality is significantly worse, but the private system in the US more than twice as expensive as the OECD public-care average.

The WHO did not rank the US with the absolute shortest waiting times. Germany had shorter wait periods and considerably better health statistics than the average American. I don't think you can argue Germany just doesn't have favorable immigration policies toward uneducated, poor people. We would need to provide all of Mexico with free healthcare to have similar integration rates.

Scandinavian countries have roughly zero population growth and they're basically one race societies. So, of course, they, like Japan, have an advantage. Millions of poor people immigrate to the U.S., which has a diversified society. It's remarkable U.S. per capita GDP is higher than Scandinavian countries, given the large number of poor in the U.S. http://finland.scandinavia-pictures.com/ You say the U.S. has short waiting periods because it has the highest proportion of people who admit they actually go without needed care. No one in the U.S. is turned away from needed care. It could be the U.S. utilizes an optimal combination of labor and capital inputs, which is typically the case in free markets. The U.S. continues to win most of the Nobel Prizes, along with "winning" in emerging industries, where there aren't any lags (which of course reflect the quality of technology, e.g. patents, along with a highly skilled workforce). If you believe Americans will choose public health insurance over private health insurance, then you'd believe anything.

No country makes you wait for emergency care. Waiting times are based on elective or delayed procedures, seeing a physician, etc... the sorts of things uninsured Americans most often say they go without.

AE: "Scandinavian countries have roughly zero population growth and they're basically one race societies. So, of course, they, like Japan, have an advantage"

Zero population growth should work against GDP growth. I don't see how being a single-race is helpful. Of course, they certainly aren't single-race, if you mean in a cultural sense. They have an equally diverse population with various languages and their major cities may often be half foreign born. Some have foreign-born populations higher than the US.

I think it's strange how strongly you hold the faith that Nordic welfare-state models create mediocrity. Of course, this is trumped by the "super-race" hypothesis, which says unified races create great societies welfare state or not.

Nietz, I'd like to see that poll showing Americans would exchange their private health insurance for public health insurance. Most uninsured Americans can afford health care (if they can't, it's free). Zero population growth should increase per capita GDP, in part, because the society is becoming older and more productive. Also, restricting immigration can lead to higher wages and lower population growth. I think, everyone knows the U.S. has greater cultural diversity than Scandinavia. I find it strange some hold on to biased beliefs no matter how much evidence contradicts their beliefs.

Nietz, I'd like to see that poll showing Americans would exchange their private health insurance for public health insurance. Zero population growth should increase per capita GDP, in part, because of higher productivity. Also, a single race implies little immigration, which can keep per capita GDP high. I think, about everyone knows the U.S. is a more diversified culture than Scandinavia. Government efforts to create equality on a massive scale tend to create mediocrity, almost by definition.

AE: "Zero population growth should increase per capita GDP, in part, because of higher productivity. "

This aint necessarily so.

Productivity is output per man-hours worked (annually). If there is no population growth, there is no significant growth in aggregate demand. If there is no growth in demand, there is no substantial increase in output.

Even enhancing manpower input technologically will not offset, I suggest, the lack of production expansion.

But, since there has never been zero net population growth in the history of mankind, the debate is irrelevant.

What fascinates about productivity is that the subject is badly understood. It is the conventional wisdom that technology "assists" productivity by "enhancing manpower". One obtains more with less.

So be it. But, the top side of the ratio is not given adequate attention. The mix of aggregate demand goods/services can also alter the productivity ratio. For instance, the transition from production to services may also affect the money value of output. As a society becomes more services orientated or as an economy substitutes national production by off-shored production, then the output mix changes substantially.

I am not sure we understand well this transition which is typically a long-term phenomenon.

Zero population growth makes the population older and an older population is more productive, except when there's a large increase in the over 65 age group, which has a negative effect on GDP (also, an increase in the 16-24 age group has a negative impact on GDP). Some countries have roughly zero population growth. A free market is an unrestricted market. A free market is more likely to determine the optimal combination of labor and capital, e.g. in health care. A restricted market or a market with less capital may require more labor, and the combination is more likely to be suboptimal.

"A restricted market or a market with less capital may require more labor, and the combination is more likely to be suboptimal."

Or, we could just be prisoners of a system facing a dilemma. Instead of an optimal healthcare system, we have low aggregate health statistics at twice the price of the rest of the developed world.

While the national programs charge overhead rates near 5%,the US private system faces rates closer to 20% as private firms outspend each other in advertising and administration. This is clearly not optimal.

You asked for a poll showing American support for a national insurance, so I will post one. However, I actually said Americans would choose it over the private system if they had to pay their choice, since public systems are much cheaper, even in the US. This poll shows what you asked for, a 2-1 margin favoring national healthcare.

N1950: "the US private system faces rates closer to 20% as private firms outspend each other in advertising and administration"

Not to mention that the advertising is focused on those who are the healthiest and have the least need for health care, in order to subsidize the aging clientele who cost more. (The same principle runs Social Security - burden the young with the care cost of the elderly.) So, enormous advertising budgets go to corralling the young to support the elderly, when this should be the norm and not a "market game".

The purpose of health care, as posted here before, is that of a public service utility, meaning of usefulness to all citizens. The service provider can (and perhaps should) be private enterprise, but only if there exists a charter of quality control and, particularly, capped pricing of various services - both supervised by a national administration. Nations should get out of the business of health care delivery, but maintain the responsibility for quality.

Otherwise it is a free-for-all, which is why the American system has scored so badly against the rest of world. Who can be proud of a score just a bit better than Cuba (WHO study of 2002), or a neonatal death rate that is a shame to a developed country.

Another problem with American health care is its emphasis on pill-popping to remedy an illness instead of preventive measures, the latter being far cheaper in terms of effectiveness but requiring more up-front investment. But, that's another matter.

Once again, America's health care system serves to engender social inequality - the really rich can afford the best and the poor find themselves being shuttled from one office to another as insurance companies try to offload the burden to another company.

Nietz, my statement above was: "I'd like to see that poll showing Americans would exchange their private health insurance for public health insurance." You haven't shown a poll to that effect and the link below states: "Nearly 90% (of Americans) said they were satisfied with their own medical providers." It seems, Americans are most concerned about the rising costs of medical care, which are rising much faster than inflation.

Lafayette, I've shown the WHO study is heavily biased towards inequality. The U.S. health care system isn't perfect. However, I wouldn't rate it slightly above Cuba. Even the WHO rates the U.S. relatively near or at the top when the inequality categories are excluded. Nietz, I wouldn't say higher costs and greater competition are positively correlated. Higher costs and higher prices may reflect initial monopoly power. For example, seven of the largest 10 biotech firms in the world are American and only one European biotech is in the top ten. So, there's not much global competition.

the fact of the matter is that a Health Care system is primordial to the development of a country's population and its well-being as well as fitness to produce.

The WHO study gives predominant weight to one key aspect of health care - accessibility by the most who need it. America's system of "private health care" is laudable ... if it would only work. It doesn't, because companies are not fools. They focus marketing on selling health care to people who rarely need it.

Romney's Masachusetts plan reminds me of motor insurance companies a great many decades ago that would not insure the accident-prone. So, the state simply threw such people into a pool and, round robin, they were assigned to an insurance company.

I don't call that health care. I call it distributing the risk.

Health care is not a "profit business". Profits and health care have contradictory logics, particularly as regards those least able to pay. Either a company makes the healthy pay for the unhealthy, or the government must make up the difference for the latter.

The well-being of the citizenry, to my mind, is a collective priority - but, then, I live in Europe and not the US ...

Lafayette, U.S. health care costs or prices are rising several times faster than the U.S. general price level. So, Americans are concerned. However, new technologies, drugs, treatments, etc. are typically more expensive initially. Also, health care generally has an inelastic demand curve and there are many instances of imperfect final price information. So, Americans face a great deal of uncertainty. Nonetheless, Americans have access to high quality health care. Nietz, the 2:1 poll you cited doesn't show how many have private insurance, public insurance, or are uninsured. Also, other polls in your article show large proportions of Americans refuse to give up quality for cheaper health care. I'm sure there could be greater efficiencies. However, there are also trade-offs.

Lafayette, my statement is based on empirical evidence, including the U.S. spent over $2 trillion on health care in 2006, the U.S. not only leads the rest of the world combined in biotechnology, but produces over two-thirds of the world's biotech goods, the article above states: "Nearly 90% (of Americans) said they were satisfied with their own medical providers. Even the heavily biased WHO stated: "The WHO gives the United States high marks for its world-class doctor training and advanced medical technology." If you want to believe Third World countries have better health care systems, that's your problem.

Lafayette, some people also pay much more for a college degree. New technologies, drugs, treatments, etc. cost more and few countries can afford them. The U.S. seems to have flatter bell curves in health, education, income, etc. A higher level of poor and hard working immigrants may skew the bell curves.

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